Some small businesses still wait for Sandy grants

Jorge Farber, owner of Madelaine Chocolates, poses for portraits at his factory in the Queens borough of New York. Madelaine Chocolates, damaged during Super Storm Sandy, has partially recovered and is continuing repairs.Associated Press

Associated Press

NEW YORK -- A year after Superstorm Sandy sent more than six feet of ocean water into their ice cream store and destroyed everything inside, Brian and Michelle McMullin are still waiting to hear if they'll get grant money from New Jersey to help pay rebuilding costs.

But 60 miles away, in New York City, a $250,000 grant from a utility helped Madelaine Chocolate start its recovery after more than four feet of water flooded the factory and left mud, rust and mold covering walls, floors and more than 100 pieces of equipment.

Small business owners who applied for grants after the Oct. 29, 2012, storm are more likely to have gotten money by now from private sources like corporations, charities and chambers of commerce rather than the government. The problem: States must, by law, follow certain steps to give grants. But a lack of planning and negative attitudes about businesses also stand in the way of getting money quickly to companies that need it, according to people who study disaster recovery.

There's no reliable total of how much grant money was available or given out following Sandy. Money comes from a variety of sources, and states are still making grants almost a year later. But it's clear that there are haves and have-nots among small companies who suffered heavy losses.

Still waiting

The McMullins applied for grant money from New Jersey eight months ago to help pay for the heavy damage to their ice cream store, Gracie and The Dudes, in Sea Bright, N.J. The store took on 6½ feet of salt water that ruined the walls, heating and air conditioning system, plumbing and electrical system. Brian McMullin estimates the damage at over $680,000. His insurance company paid just $223,000, citing depreciation in the building's value.

McMullin describes the ongoing application process as long and frustrating, with continual requests from the state for detailed information about the value of each piece of equipment he lost, how long he's been in business and more. Caseworkers frequently change and each requests different information.

"How much do you need to prove?" McMullin said. "They saw the damage, they've seen the estimates."

The McMullins rebuilt but couldn't reopen until two weeks after Labor Day, missing the summer, when they make 85 percent of their annual revenue. They raised money for the repairs by selling one of their two other stores and cashing in savings and their four children's college funds.

Officials of New Jersey's Economic Development Authority, which administers the grants, were not available to be interviewed despite repeated requests by The Associated Press, according to Virginia Pellerin, a spokeswoman for the agency.

"It's just an incredibly busy time and the availability of our senior leadership is very limited," Pellerin said in an email.

The development authority has been advertising the grants. But many business owners are waiting for money. Dina Long, the mayor of Sea Bright, says she knows of just one business in the borough that has received a grant. Officials approved 102 grant applications statewide as of Tuesday, and 712 have been submitted and are being reviewed, Pellerin said in an email.

A timely grant

A $250,000 grant from natural gas utility National Grid helped Madelaine Chocolates, located in New York City's Rockaway section, reopen after it was flooded by 44 inches of water.

Salt water, mud and rust damaged the equipment in Madelaine's 100,000-square foot building. Walls, floor, ceiling and electrical equipment had to be repaired or replaced. The company lost nearly 2 million pounds of chocolate -- 175,000 pounds of finished products, about 500,000 pounds of unfinished chocolate and 250,000 pounds of liquid chocolate.

"The place was devastated," said CEO Jorge Farber. "We couldn't go through the door at the beginning because everything was strewn all over the place," Farber says.

He estimates costs from damage and lost revenue at $50 million. Besides the grant, he's gotten an SBA loan and money from his finance company and used personal assets. The $15 million Farber pulled together paid for cleanup and the repair of enough machinery to resume partial production on July 1. Madelaine turns out 60 percent of its normal capacity of 100,000 pounds of chocolate a day. It has rehired 100 of its 425 workers.

What takes so long?

Distributing government grants to businesses can be a protracted process. Often politics are involved, and usually, laws designed to prevent fraud.

Federal money for Sandy was held up by Republican opposition in Congress. Once approved, it was allocated to the Department of Housing and Urban Development. States then applied for what are called community development block grants. When states get the money, they turn it over to economic development agencies. The agencies then give the money to businesses. States including New York have constitutional provisions that prohibit them from distributing money directly to private companies.

Every time there's a disaster, officials start from scratch, creating new agencies and programs because the governments don't have contingency funds, said James Fossett, associate professor of public administration at the State University of New York at Albany. The startup period lengthens the amount of time that companies must wait for grants. And in some cases, the funds come too late. The grant program for small businesses in New Orleans wasn't started until a year after Hurricane Katrina. By the time the grants were announced, many business owners had decided not to return to the city.

There's also resistance to giving small company grants because of the belief that business owners are well off, says Jeffrey Robinson, an assistant professor of entrepreneurship at Rutgers University in New Jersey.

"They think, `they're making money, why should we give it to them?"' Robinson says. "But you don't know how much you rely on the local supermarket or the corner Dunkin' Donuts until it's gone."

Owners can be reluctant

But owners also can be reluctant to apply for grants. Many believe government is more interested in taking money from them in the form of taxes than giving them money, Robinson said. Another wrinkle is that small business owners have difficulty finding time to fill out applications and to gather documents because they are so busy running their companies, said Seth Diamond, director of the Governor's Office of Storm Recovery.

That's a reason why New York officials are expediting grants for businesses recovering from Sandy and Hurricane Irene and Tropical Storm Lee in 2011. The state's Small Business Storm Recovery program is giving owners preliminary grants of $10,000 while applications are being processed. Officials found many owners were skeptical that the state would come through with money although it had $400 million budgeted for aid for businesses and homeowners, Diamond said.

"There's a lot of reluctance in the small business community," Diamond said. "They don't think any of this is real."

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